Loans against gold, silver pledge up to limit not norm violation: RBI

RBI clarifies that loans sanctioned by banks against voluntary pledges of gold and silver, up to the collateral-free limit, do not violate the central bank's guidelines on collateral

The Reserve Bank of India (RBI) on Friday clarified that loans sanctioned by banks against the voluntary pledge of gold and silver as collateral—up to the collateral-free limit—will not be considered a violation of the central bank’s guidelines on collateral.

 

As per RBI guidelines, banks have been mandated not to accept collateral security for loans up to ₹10 lakh extended to units in the micro and small enterprises (MSE) sector. They have also been instructed to extend collateral-free loans up to ₹10 lakh to all units financed under the Prime Minister Employment Generation Programme (PMEGP).

 

Additionally, banks may, based on the good track record and financial position of the MSE units, increase the limit to dispense with the collateral requirement for loans up to ₹25 lakh (with the approval of the appropriate authority).

   

On the other hand, banks have been mandated by RBI to waive collateral security and margin requirements for agricultural loans, including loans for allied activities, up to ₹2 lakh per borrower.